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Managing payroll effectively requires making sure it’s calculated correctly, your employees receive their salaries on time, and it’s compliant with local laws. In the Middle East and North Africa (MENA) region, payroll management comes with its unique set of challenges, including the Wage Protection System (WPS) and other local tax regulations. It must be compliant with.
Without the right tools and resources, employee payroll can be a minefield for errors that can cost both your company and employees time and money. So, what are the most common mistakes you should look out for? Let’s take a look.
5 Common Payroll Errors
1. Inadequate Compliance with WPS
The Wage Protection System (WPS) is a crucial payroll regulation in many MENA countries, including the United Arab Emirates, Saudi Arabia, and Qatar. It requires employers to pay their employees through approved financial institutions and submit payroll data electronically to ensure transparency and accuracy. Failing to comply with WPS can lead to penalties, fines, and even the suspension of business operations.
Common Mistake: Ignoring or mishandling WPS requirements can result in severe consequences. Employers should establish WPS-compliant bank accounts for salary transfers, maintain accurate records, and submit timely reports to the relevant authorities.
2. Misclassification of Employees
Misclassifying employees as independent contractors or vice versa can lead to significant payroll errors and potential legal issues. In the MENA region, where the employment landscape can be complex, understanding the distinction between employees and contractors is crucial.
Common Mistake: Many employers mistakenly classify workers to reduce their tax or legal obligations. Properly categorizing employees is essential to ensure compliance with labor laws, tax regulations, and social security contributions.
3. Inaccurate Calculation of Local Taxes
Each country in the MENA region has its tax regulations, which can be quite intricate. Failing to calculate local taxes correctly can result in overpayment or underpayment, causing financial discrepancies and potentially damaging relationships with employees and tax authorities.
Common Mistake: Employers should invest time and resources in understanding the tax laws specific to their location. Utilizing reliable payroll software or outsourcing payroll to experts can help ensure accurate tax calculations.
4. Poor Record-Keeping
Maintaining accurate payroll records is a fundamental requirement for businesses in the MENA region. Incomplete or disorganized records can lead to payroll errors, difficulties during audits, and potential fines.
Common Mistake: Neglecting payroll record-keeping can cause confusion and disputes between employers and employees. It is essential to maintain thorough records of salary payments, deductions, and any relevant documentation.
5. Ignoring Social Security and Benefits
Many MENA countries mandate employers to contribute to social security schemes and provide specific benefits to their employees. Failing to comply with these regulations can lead to legal complications and harm employee morale.
Common Mistake: Employers must keep track of social security contributions and ensure that employees receive the benefits they are entitled to. Ignoring these obligations can lead to both legal and reputational issues.
How to Avoid These Common Payroll Mistakes?
Believe it or not, these mistakes and missteps are more common than you would expect. But the answer to solving them is simple: an HRMS.
An HRMS, like ZenHR, streamlines your payroll process for you. ZenHR’s payroll module includes automated salary calculations and deductions, salary history, and localizations for GOSI, WPS, social security, and tax in your country.
You can also select the default currency and exchange rate used at your company or branch to be applied to your financial transactions and salary calculations. ZenHR’s payroll module also allows you to seamlessly integrate with Mudad Business, Muqeem, and The General Organization for Social Insurance (GOSI) in Saudi Arabia.
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Amanee Hasan is a Senior Content Writer at ZenHR, an award-winning and top-rated HR solution that offers world-class HR software services in the MENA region. Her main focuses are SEO, UX writing, copywriting, and creating content highlighting the latest HR trends, and gives organizations and individuals the tools they need to create successful work environments where people thrive.
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